The JSH Reporter JSH Reporter - Fall 2017 | Page 14
BAR LIABILITY ARTICLE
014
ASSAULT AND BATTERY
ENDORSEMENTS:
IS IT REALLY LAST CALL ON
BAR LIABILITY COVERAGE?
AUTHORS: Michael Hensley & Erica Spurlock
EMAILS: [email protected]; [email protected]
BIOS: jshfirm.com/MichaelEHensley; jshfirm.com/EricaJSpurlock
One of the most common risks associated with operating a bar
or a restaurant that serves alcohol are claims arising out of fights.
Because of this, premiums for insurance that fully covers claims
arising out of assault and battery can be quite high. Often times,
smaller or newer businesses may opt for cheaper policies as
a cost-saving measure, meaning they purchase a commercial
general liability policy containing an endorsement outright
excluding coverage, or providing only a small dollar sub-limit,
for claims arising out of an “assault or battery.” These Assault
or Battery Endorsements are generally written so broadly that
they even apply to claims alleging negligent hiring, training,
and supervision of security staff alleged to have resulted in the
injury. On top of all this, Plaintiffs’ attorneys often try to find ways
around these endorsements, meaning that one serious injury
followed by a creatively-pled complaint could suddenly put the
assets of the bar or restaurant at risk.
In 2010, the Arizona Court of Appeals examined and upheld such
an endorsement as unambiguous, and thus, enforceable on its
face. See Tucker v. Scottsdale Indem. Co., No. 1 CA-CV 09-0732,
2010 WL 5313753, at *1 (Ariz. Ct. App. Dec. 21, 2010) (Briefed
and argued by co-author Mike Hensley and the JSH appellate
team as counsel for Scottsdale Indemnity). Further, the Court
of Appeals found that the insured’s reliance on the expertise
of her agent to provide adequate insurance was insufficient to
overcome summary judgment under the reasonable expectations
doctrine. Id. Though Tucker was an unpublished memorandum
decision, and thus not authoritative case law, it was one of
the first Arizona cases to really examine assault and battery
endorsements limiting or excluding coverage. As such, the ruling
in Tucker gave insurance carriers a sense of certainty concerning
the enforceability of assault and battery endorsements,
even when broadly worded, and gave them a seemingly-firm
legal basis for coverage denials or limitations based on such
endorsements. It appears, however, that the certainty afforded by
Tucker may be less certain, and that the decision might not be
the “last call” on the enforceability of such endorsements.
A RECENT CASE IN THE UNITED
STATES DISTRICT COURT FOR
THE DISTRICT OF ARIZONA MAY HAVE
OPENED THE DOOR TO NEW ATTACKS
ON THE VALIDITY OF ASSAULT AND
BATTERY ENDORSEMENTS.
A recent case in the United States District Court for the District
of Arizona may have opened the door to new attacks on the
validity of assault and battery endorsements. In Fall v. First
Mercury Ins. Co., the District Court agreed with the Tucker court’s
conclusion concerning the ambiguity of an assault and battery
endorsement, finding that the policy was not ambiguous despite
not clearly defining “assault,” “battery,” and “arising out of.” 225
F. Supp. 3d 842, 847 (D. Ariz. 2016). The Court emphasized that
as long as an endorsement’s language is clear, courts will be
unwilling to create ambiguity to create coverage. The Fall Court
also found, however, that under the facts alleged in that case,
the insured bar had a reasonable expectation of coverage for a
claim stemming from a “physical altercation between a patron
and its bouncers who were trying to protect other patrons.” Id.
at 848. Under this analysis, evidence pertaining to reasonable
expectations – such as prior negotiations, circumstances of
the transaction, whether the terms are bizarre and oppressive
or eviscerate the non-standard terms of the policy, or if the
endorsement applies only in limited circumstances – is sufficient
to show a dispute of material fact. The Plaintiffs in Fall presented
evidence that the bar manager was a long-term bar owner who